“Street Smarts” by Norm Brodsky
Overview:
The provided excerpts from Norm Brodsky’s “Street Smarts” offer practical, experience-based advice on various aspects of entrepreneurship, business management, sales, negotiations, and maintaining a healthy business mindset. Brodsky emphasizes the importance of learning from mistakes (both your own and others’), developing key mental habits, understanding financial fundamentals, building strong relationships, and adapting to changing circumstances. He frequently uses anecdotes and real-world examples to illustrate his points.
Key Themes and Ideas:
- The Importance of “Street Smarts” and Mentorship: Brodsky stresses that while formal education and business plans are valuable, practical “street smarts” are essential for navigating the challenges of building a business. He defines this as a collection of “habits of mind” that help entrepreneurs handle challenges. “We al have mentors in business, although we’re not always aware of the role they’re playing.” He also emphasizes learning from one’s mistakes, noting, “A smart person learns from his or her mistakes. A wise person learns from other people’s mistakes.”
- The “X Factor”: Brodsky mentions an undefinable “X Factor” that separates those who succeed from those who don’t. “There is one other quality that you must have to succeed as an entrepreneur —and it may be the most important of al . What’s more, it’s a quality that can’t be taught or learned. Either you have it or you don’t.”
- Viability & the Sales Mentality: Brodsky cautions against letting the sales mentality overshadow the long-term goal of determining viability. “The sales mentality gets in the way by substituting a short-term goal, making a sales target, for the long-term one: determining viability.” He argues it is better to have a bad month and make a rational assessment than to compromise margins to hit sales targets.
- Peripheral Vision & Flexibility: The ability to see things others miss is critical. “By that, I mean the ability to see things out of the corners of your eyes and thereby to find solutions to problems that other people think can’t be solved.”
- The Pitfalls of Over-Leverage and Unrealistic Growth: Brodsky highlights the dangers of excessive leverage and chasing growth at all costs. He provides examples of entrepreneurs who were skilled at starting companies, “but then he starts leveraging them like crazy so that he can chase after business opportunities. He’l do whatever is necessary to get the credit he needs— even to the point of fooling around with his financial statements.” He also criticizes unrealistic business plans and hockey-stick projections.
- Niche Markets and Local Focus: Brodsky advocates for finding a niche and differentiating from competitors. His success in the records storage business stemmed from offering a city-based solution, contrasting with competitors who stored records far outside the city. “I would build a huge, modern facility in the city… The customers would be close to their records.”
- Importance of Due Diligence Before Buying: Brodsky shows the importance of understanding financials before buying into a business. “Josh decided he’d had his fil of herbal lotions. He told the sel er he wasn’t interested in pursuing the deal. He wasn’t happy about letting it go, but he couldn’t argue with the numbers.”
- Raising Capital Strategically: The book emphasizes researching potential investors and tailoring the approach to their needs. Brodsky also points out the importance of preparing for rejection and learning from the experience. “To make the most of your opportunities, you need to plan your investment strategy just as you plan your business.”
- The Bank Relationship: Building a strong relationship with a bank is crucial. Brodsky emphasizes choosing a bank over an asset-based lender when possible, highlighting the importance of retaining control over receivables and demonstrating creditworthiness. “Banks look for good businesses—and good businesspeople—to invest in, whereas asset-based lenders look for good receivables to acquire.” He also gives practical advice for managing the bank relationship, avoiding common mistakes that can lead to loan recalls.
- Negotiation Strategies: Brodsky stresses preparation, listening, and understanding the other party’s priorities. He states, “The second rule is: always assume that everyone else in the room is smarter than you.“
- Reputation is Key: A good reputation is an invaluable business asset. “I’m talking about what people think of the way you do business, how they assess your character as a businessperson.” This impacts hiring, attracting customers, securing financing, and making deals.
- The Value of Small Customers: Brodsky advocates for the benefits of small, numerous customers over relying on a few large ones. “Smal customers are the backbone of a solid, stable, profitable business.” Small customers offer better gross margins and reduce dependency on individual clients.
- “You Don’t Ask, You Don’t Get”: Brodsky champions the importance of overcoming the fear of asking for what you want. “You realize that you’l never get anything unless you ask for it, and so you might as wel try.” This applies to sales, negotiations, and enlisting help from others.
- Understanding Your Real Business: Brodsky emphasizes defining the true business you’re in, beyond the superficial. He uses the example of a fish supplier who saw himself as being in the “banking business,” extending credit to restaurants through fish deliveries. “I’m real y in the banking business. I make loans to restaurants in the form of fish.”
- The Capacity Trap: Brodsky warns against discounting prices simply to utilize excess capacity, potentially damaging long-term profitability.
- Building Trust and Relationships with Customers: Focus on going the extra mile to ensure customer satisfaction and building trust before and after the sale.
- Life Planning before Business Planning: Plan your life first, then craft your business around it.
- Learn to say No: Know when to turn down business that won’t work for you.
- Be Unselfish: Focus on understanding and answering client concerns by putting your ego aside.
- Creeping expenses: Manage all business expenses and prevent costs from creeping up.
- Hiring employees: Don’t just hire salespeople from your industry and make sure job applicants have held a minimum of two prior jobs.
- Trust in lawyers: You are responsible for your business decisions. Attorneys give legal advice and are not responsible for your business moves.
- Slow down: Take a moment to analyze the situation and make rational decisions.
Overall Message:
“Street Smarts” promotes a practical, hands-on approach to entrepreneurship, emphasizing adaptability, continuous learning, strong relationships, financial discipline, and a resilient mindset. It argues that success comes not just from planning but from developing the right mental habits and learning from experience.
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